Troubled European Economies Stifle Entrepreneurship

Greeks, Spaniards, Italians say their governments make it hard to start and manage businesses

WASHINGTON, D.C. -- Residents in wealthier EU countries with the most unsustainable debt burdens -- including Greece, Italy, Spain, and Ireland -- are also among the most likely to say their government makes it hard to start and manage a business. The climate for entrepreneurs is most inhospitable in Greece, where more than 8 in 10 residents see their government as an obstacle.

Beyond their immediate debt crises, these countries will need to find ways to address their underlying problem: low economic productivity and low growth. Gallup's findings, based on surveys in 16 EU member countries in 2011, suggest that removing perceived barriers to entrepreneurship may offer part of the solution. Small and medium-sized enterprises employ about two-thirds of the EU's private-sector workforce and are vital growth engines.

The widespread perception in Greece, Italy, and other debt-laden countries that government makes starting and running businesses difficult may discourage entrepreneurial ambition in places that need it the most. Gallup's data correspond with other international measures of business regulation; for example, of the 25 EU countries ranked for the World Bank's 2012 Ease of Doing Business Index, Greece and Italy were furthest down on the list. Turning those perceptions around will require reforms in key areas to reduce administrative burdens and improve transparency in government procedures.

Corruption Presents Barrier to Business Ownership

Cutting through the red tape will be no easy task, however. Administrative hurdles create opportunities for local officials to abuse their status as gatekeepers, often by awarding licenses or contracts to business owners who pay kickbacks. The issue is particularly severe in Greece, which maintains a huge, patronage-driven bureaucracy. But Gallup data reveal that among all EU member countries, the view that the government makes it easy to start and manage a business falls sharply as perceptions of widespread corruption rise.

In several of Europe's most economically troubled countries, fewer than 20% say the government makes it easy to manage a business, and more than three-fourths say corruption is widespread in government. The pattern shows the degree to which bureaucratic corruption can restrain free enterprise and limit economic growth.

Implications

Europe's heavily indebted countries will need to enact reforms to establish a more sustainable basis for growth and prevent another debt crisis from threatening the eurozone. The task of revitalizing private-sector development in these countries will depend heavily on the willingness of millions of entrepreneurs to take risks on innovations and new businesses. But the confidence to do so is difficult to muster in places where corruption undermines the rule of law and ratchets up the uncertainty facing would-be business owners. Widespread perceptions of corruption imply the path to prosperity will require a great deal of courage -- not just among entrepreneurs, but also among political leaders willing to take their own considerable risks to change the system.

Results are based on face-to-face and telephone interviews with approximately 1,000 adults in each EU member state between March and June 2011. For results based on each sample of national adults, one can say with 95% confidence that the maximum margin of sampling error ranged from a low of ±3.5 percentage points to a high of ±4.0 percentage points.

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